FHFA Perspectives on Foreclosure Prevention and Principal Forgiveness

Transcription

1 FHFA Perspectives on Foreclosure Prevention and Principal Forgiveness Edward DeMarco, Acting Director Federal Housing Finance Agency The Brookings Institution April 10, 2012

2 My goal today is to answer two key questions: 1. What do the Enterprises do to assist borrowers through these troubled times in housing? 2. How has FHFA assessed principal forgiveness as an option for assisting troubled borrowers? 2

3 Figure 1. Enterprise Alternatives to Foreclosure HAMP Retention Proprietary Modifications Liquidation Non-Retention Reduce monthly payment to 31% of homeowner s gross monthly income Steps: Serve those ineligible for HAMP; at least 10% reduction in homeowner s monthly payment Steps: Offer homeowners solutions other than foreclosure Options: Collateralize arrearages Collateralize arrearages Home Affordable Foreclosure Alternative Reduce interest rate Forbear principal (for loans >115% LTV) Enterprise Short Sale Extend Term Extend Term Enterprise Deed-in-Lieu Forbear principal Fixed interest 4.625% 3

4 Table 1. Enterprise Delinquencies and HAMP Permanent Modifications Fannie Mae and Freddie Mac loans, delinquencies, and HAMP active permanent modifications versus US total (Counts in thousands) US Fannie Mae & Freddie Mac GSE share Loans serviced 48,742 29,045 60% Serious delinquent rate 7.7% 3.8% Serious delinquent loans 3,768 1,105 29% HAMP active permanent modifications % Sources: Loans Serviced: US: MBA Delinquency Survey; 4Q11. US loans serviced represents the reported number in the survey (42,892,629) grossed up for (i.e. divided by) the reported level of coverage of the survey (88%). GSE: FHFA Fourth Quarter Foreclosure Prevention Report Serious Delinquency Rates: US: MBA Delinquency Survey. GSE: FHFA Fourth Quarter Foreclosure Prevention Report Serious Delinquent Loans: US: FHFA estimate based on the reported serious delinquency rate in the survey times the adjusted number of loans serviced. GSE: Fannie Mae and Freddie Mac; Dec 2011 HAMP Active Permanent Modifications: US: MHA Program Performance Report; Dec GSE: MHA Program Administrator; Dec

5 Table 2. Re-Default Rates Re-Default Rates for Portfolio Loans and Loans Serviced for Other (60 or More Days Delinquent)* Investor Loan Type 3 Months After 6 Months After 9 Months After 12 Months After Modification Modification Modification Modification Fannie Mae 11.7% 18.8% 24.1% 27.5% Freddie Mac 11.3% 18.1% 23.2% 26.8% Government- Guaranteed 17.2% 34.6% 44.2% 49.2% Private 23.5% 34.5% 42.0% 46.7% Portfolio Loans 7.9% 15.2% 20.6% 24.6% Overall 15.7% 26.0% 32.7% 37.0% *Data as of December 31, 2011 and include all modifications made since January 1, 2008, that have aged the indicated number of months. Source: OCC Mortgage Metrics Report, Fourth Quarter 2011; /mortgage-metrics-q pdf 5

6 Table 3. Modification Performance, by LTV Fannie Mae Modification Performance: Loan Count and % Loans current or paid off 12 months after modification MTMLTV at time of Modification HAMP Loan HAMP % Count 1 current 2010 and later FNM proprietary modifications with Trials (2)(3) % current of 2010 and later FNM proprietary modifications with Trials 3 Current LTV <=80% 35,516 76% 14,385 72% LTV>80 and <=90 24,005 75% 9,207 72% LTV>90 and <=100 27,755 73% 10,396 71% LTV>100 and <=125 48,707 74% 16,554 72% LTV>125 and <=150 23,743 76% 7,283 74% LTV>150 and <=175 12,312 75% 3,747 74% LTV>175 and <=190 4,536 74% 1,251 74% LTV>190 8,121 72% 2,345 70% 1) 441 loans with Missing MTMLTV 2) 214 loans with Missing MTMLTV 3) Proprietary modifications include: Alt Mod 2010, FNM Mod and Mod24 6

7 Table 4. Modification Performance, by Pay Change Fannie Mae Modification Performance: Loan Count and % Loans current or paid off 12 months after modification Payment Change HAMP Loan Count HAMP % current Count on 2010 and later FNM modifications with Trials 3 % current of 2010 and later FNM proprietary modifications with Trials 3 Payment Increase % % Payment Decrease 0 <-10% 13,908 60% 4,640 57% Payment Decrease 10 <-20% 22,807 65% 7,741 62% Payment Decrease 20 <-30% 29,490 69% 10,085 69% Payment Decrease > 30% 118,598 79% 42,073 79% 3) Proprietary modification include: Alt Mod 2010, FNM Mod and Mod24 7

8 Table 5. Foreclosure Prevention Transactions Single-Family Book Profile (at period end) Foreclosure Prevention Actions Year-end Number of Single- Family Mortgages Serious Delinquency Rate Number of Serious Delinquent Loans Number of Modifications Number of all other Foreclosure Prevention Actions Total Foreclosure Prevention Actions Number of Foreclosures 4Q08 30,536, % 652,766 23,777 48,218 71,995 34, ,509, % 1,470, , , , , ,717, % 1,255, , , , , ,044, % 1,104, , , , ,738 Total 1 1,084,554 1,030,664 2,115,218 1,047,288 1 Since the first full quarter in conservatorship (4Q08). 8

9 Figure 2. Investor Loss 9

10 Table 7. HAMP v. HAMP PRA, 5% Current Imminent Default - Summary Enterprise Results HAMP v. HAMP PRA, 5% Current Imminent Default Data as of 6/30/2011 ALL LOANS > 115 MTMLTV $ in Billions HAMP HAMP PRA Number of Loans 691, ,008 Outstanding Balance $137.6 $137.6 Loss if No Modification (1) $63.7 $63.7 Principal Forgiveness/Forbearance Amount $15.2 $35.4 Average Forgiveness/Forbearance Per Loan (in $) Loss if only borrowers who are NPV Positive get a Modification (2) Decrease in Loss from Providing Modification (1) - (2) $22,000 $51,000 $55.5 $53.7 $8.2 $9.9 10

11 Table 8. HAMP v. HAMP PRA, 5% Current Imminent Default By MTMLTV $ in Billions* HAMP v. HAMP PRA with Triple PRA Incentive Payments Subsidy Analysis by MTMLTV 5% of Current Loans are assumed to be in Imminent Default Data as of 6/30/2011 All NPV Positive Loans > 115% MTMLTV at 6/30/2011 Sum of Expected Loss, HAMP Modification Sum of Expected Loss, HAMP PRA Modification Sum of Difference in Expected Losses Between the Modification Scenarios Total Gross Potential PRA Incentive Payments Sum of Expected Incentive Payments Value Based on Default Rate 115% < MTMLTV <=125% $10.1 $10.1 $0.0 $1.1 $ % < MTMLTV <=140% $12.4 $12.4 $0.0 $1.9 $0.8 MTMLTV > 140% $33.0 $31.2 $1.8 $6.5 $2.4 Grand Total $55.5 $53.7 $1.7 $9.5 $3.8 *Columns may not sum due to rounding 11

12 Table 9. Offset of HAMP PRA Incentives Number of Participants Decrease in Enterprise Losses Using HAMP PRA over Standard HAMP (in $B) Number of Strategic Modifiers Needed to Offset Benefit of HAMP PRA Incentives Full Participation 691,000 $ ,000 Half Participation 345,500 $ ,000 Quarter Participation 172,750 $ ,000 12

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